Earning rates and performance

Earning rates are needed for daily member transactions and will determine the actual performance a member achieves based on the timing of their individual transactions. The earning rates are determined based on the best available information at the time they are declared. Valuations are fed into the earning rates calculation as soon as practical after they are received.

Investment performance for each investment option is calculated after fees and taxes. Past performance is no indication of future performance. Investment performance is calculated using the actual value of investment option assets as at the end of the quoted performance period and is indicative only of the performance that a member achieves on their investment. Investment performance is based on final valuations as at period end. Using earning rates to calculate investment performance will provide similar but not identical rates to the published investment performance figures.

Application of earning rates to benefit payments

Earning rates determined for the dates above reflect close of market valuations on that date.

Member benefit payments are generally calculated and processed using the earning rate applicable on the date of processing. Usually, the earning rate applicable on the date of processing is based on valuation information for the day two business days prior to the processing date. This timing reflects when the valuation information is available and the time required to calculate and approve the earning rate. As an example, a lump sum benefit payment calculated and processed on 27 March will generally use the earning rate determined for 25 March, which reflects close of market valuations for 25 March.

How do performance and earnings affect your benefit?

The defined part of your benefit is unaffected by earnings. However, amounts transferred into the PSS and any government co-contributions are affected by earnings of the Default Fund, which can be positive or negative.

None of your benefit including these amounts can be switched.

The level of earnings from the Default Fund can affect the tax you must pay when you claim your final PSS benefit. For example, these earnings may affect the amount of tax deducted from your fortnightly pension payments if you choose a lifetime CPI-indexed pension.

This is because the level of earnings changes how the three components of your PSS benefit work: the employer-financed, productivity and member components. Positive earnings increase the taxed member and productivity components and decrease the untaxed employer-financed component. In this case, the component of your final benefit already taxed increases, meaning positive earnings can have the effect of decreasing how much tax you may pay after you leave the PSS.

Fund earnings have a more direct impact on your benefit. The accumulation components of your benefit will be affected by earnings, which can be either negative or positive in line with the investment performance of your chosen option – the Default Fund or Cash Investment Option.

The accumulation components are your member contributions (the member component), the post 1 July 1990 productivity component and any other amounts that are from a taxed source in your account, such as transfers paid into the PSS and government co-contributions.The employer-financed component of your benefit, as determined at the time your benefit is preserved, moves in line with the Consumer Price Index (CPI). This is a cost of living index, measuring the rate of inflation in the prices of goods and services.

If you are an associate member

Fund earnings also have a more direct impact on your benefit. The accumulation components of your benefit will be affected by earnings, which can be either negative or positive in line with the investment performance of your chosen option – the Default Fund or Cash Investment Option.

The value of the taxed component of your benefit (determined when you became an associate member) isn’t affected by earnings. Its value is adjusted by the long-term Treasury bond rate (treasury bonds are medium to long-term debt securities issued by the government).